World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Saturday, November 21, 2009

Well, here we are, still no apology from Amazon regarding their inappropriate ban of this movie. Bill is not so unwise as to fail to take advantage of their transgression.

So, we do a little digging. Who is Amazon’s CEO Jeff Bezos? Turns out that prior to founding Amazon he helped to develop “cloud” quant computing techniques for a $250 billion hedge fund, and then went on to become V.P. at Banker’s Trust, a company on the leading edge of financial engineering in credit derivatives. Banker’s trust’s actions at the time later led to charges of fraud and a guilty plea to fraud charges from the State of New York.

Under the management of Charlie Sanford, Bankers Trust became a leader in the nascent derivatives business in the early 1990s. Having de-emphasized traditional loans in favor of trading, the bank became an acknowledged leader in risk management. Lacking the boardroom contacts of its larger rivals, notably J. P. Morgan, BT attempted to make a virtue of necessity by specializing in trading and in product innovation.

Despite all its prowess in managing the risks in the trading room, the bank suffered irreparable reputational damage in early 1994, when some complex derivative transactions caused large losses for some major corporate clients. Two of these - Gibson Greetings and Procter & Gamble (P&G) - successfully sued BT, asserting that they had not been informed of or [in the latter case] had been unable to understand the risks involved. The bank's row with P&G made the front page of major US magazines. This was worsened when several Bankers Trust bankers were caught on tape remarking that their client [Gibson Greetings] would not be able to understand what they were doing.

Bruce J. Kingdon, the head of the bank's Corporate Trust and Agency group spearheaded the fraud and entered into a guilty plea in the US District Court for the Southern District of New York and was sentenced to community service. Certain of his subordinates were thereafter barred forever by the SEC from working in the securities markets.

Community service! My, that’s hard time. Subordinates barred by the SEC? I wonder how come they didn’t get the Martin Armstrong routine? Hmmm.

So, is this all just an honest mistake, a misunderstanding? Well, Amazon has the opportunity to do the right thing. What say we help guide them in making the right decision, unlike the decisions that were made in regards to computer trading and derivatives of which Bezos was an engineer!